NEW YORK, Aug 17 - Just over a year ago, Oregon Senator Jeff
Merkley was looking for a place to make a bold statement about
his latest crusade: taking Wall Street's traders to task for
gaming commodity markets.
His office telephoned Bruce Kehe, marketing director at
Portland's Hopworks Urban Brewery, to see if the microbrewer
would host an event at which Merkley would blast banks such as
Goldman Sachs Group Inc for driving up the price of
aluminum and other commodities.
Allegations that banks were hoarding aluminum in warehouses
they own had captured regulatory, legal and political attention
in July 2013, when Merkley participated in the first hearing on
In the past year, the Senate Banking Committee has held a
second hearing on the issue; the Federal Reserve said it would
consider ways to curb banks' commodities activities and
solicited public comment on the matter; and banks including
JPMorgan Chase & Co and Morgan Stanley have sold
portions of their business.
But even as the Fed has gone quiet on the issue, Merkley is
In June, two months after the Fed's comment period closed,
he submitted a seven-page letter in which he urged the regulator
to severely limit banks' commodities activities, citing several
provisions of the Volcker Rule under which it could act.
Now, as he awaits a response from the Fed on the commodities
issue, he is pondering his next steps.
"I feel that the Fed has not come to grips with this issue,"
he said in a recent interview with Reuters.
"There doesn't seem to be a conversation in the regulatory
world saying 'Isn't there a fundamental conflict between owning
oil pipelines and trading on the price of oil?'"
Kehe himself was less convinced of the link between banks
and the cost of the aluminum cans he uses for his organic hops,
but he called the August 2013 press conference, which also
included two Oregon Democratic members of the House of
Representatives, Suzanne Bonamici and Earl Blumenauer, "a solid
BEHIND THE SCENES
While Senators Sherrod Brown and Elizabeth Warren often
capture headlines with their attacks on Wall Street, Merkley has
operated a quieter behind-the-scenes campaign that people say
reflects his deliberative, persistent political style.
"He's more like a professor than a senator. If you were on a
bus with him and someone offered you a thousand dollars to pick
out the senator, you couldn't do it," said Dennis Kelleher,
president of Better Markets, a financial reform advocacy group
in Washington, D.C.
The freshman lawmaker, a Democrat, is already well known in
some financial circles as a force behind the Volcker rule, which
clamped down on banks' speculative bets. Merkley recalls phoning
at least 80 other senators personally to convince them of its
He could put forward legislation on commodities in the next
session, but, as he notes, "legislation is hard to come by in
ENRON "DEJA VU"
With connections to beer cans and power prices, commodity
trading is a prime example of the kind of wonky issue Merkley,
who is up for re-election in November, loves to tackle, even if
it may not top voters' agendas.
The first person in his family to attend college, he lives
in the same working-class East Portland neighborhood where he
grew up, and he relishes defending "the little guy" from Wall
Street machinations, according to interviews with a dozen people
who know him.
Merkley traces his interest in commodities to the late
1990s, when Enron ran a trading desk in Portland's World Trade
Center while he was serving in Oregon's state legislature.
From downtown Portland, Enron's traders manipulated
electricity markets up and down California, causing price spikes
and major blackouts throughout 2000 and 2001.
"It was certainly an education about what can go wrong if
the same entity is both making bets on the price of something,
and able to influence its supply and demand," Merkley said.
He called similar allegations against JPMorgan Chase & Co
, which were settled with the Federal Energy Regulatory
Commission for $410 million, "a scary echo, or a deja vu," of
the Enron scandal.
Art Robinson, chair of the Oregon Republican Party, said
Merkley has jumped on the commodities bandwagon for political
"Wall Street can run itself just fine. It probably doesn't
need Jeff Merkley's help," he said.
Merkley acknowledges that pushing the Fed to regulate banks'
commodities activities will not happen overnight.
He called the June letter "the culmination of more than two
years of advocacy" on the issue, and said he brings it up with
regulators at every chance he gets.
"We're reviewing a number of possibilities, and we continue
to work with regulators themselves," he said, declining to offer
Those who know him say he is in it for the long haul.
"He's not flashy; he's dogged," said Representative
Blumenauer, who worked with him in the 1990s to transform an
Oregon neighborhood known as "crack alley," when Merkley ran the
state chapter of Habitat for Humanity.
(Reporting by Anna Louie Sussman; Editing by Josephine Mason
and Lisa Shumaker)